The Case Against Net Neutrality

The Oxford English Dictionary defines net neutrality as “the fact or principle of Internet service providers enabling access to all content and applications regardless of the source or destination, and without favoring or blocking particular formats, products, websites, etc.” (Net Neutrality). While treating all internet services may sound appealing on the surface, we know that the poisoned apple doesn’t always look bad. Like many other bad ideas, in order to see the true costs outweighing the true benefits, one must look beneath the surface and into the cold hard reality. While many proponents of this policy may be well intentioned, we must still look into the costs of Net Neutrality and objectively evaluate it. The harmful policy of net neutrality should be rejected on the grounds of excessive costs, a lack of fairness and the effectiveness of the status quo. As Milton Freidman, the 1976 winner of the Nobel Peace Prize in Economics said, “One of the great mistakes is to judge policies and programs by their intentions rather than their results” (Becker Friedman).
When net neutrality comes to mind most do not think of the massive costs associated with it. They don’t envision the jobs lost, never or the reduction of economic growth that is a direct result of net neutrality. This will happen because increased costs of regulation will be an incentive against investing. Higher costs of a product, or in this case a investment, lead to less spending on that product. By looking beyond the surface one can see that the costs of the proposed net neutrality policy are staggering. One estimate from the New York University School of law estimated the US economy would lose 62 billion dollars, 502,000 jobs over the next decade, and a cut in internet investment by ten to thirty percent if the proposal of net neutrality is accepted. The same New York University study found that job loss could be even worse than the low estimate, reaching up to 700,000 jobs (Davidson). The costs will not be limited to just jobs and the macro economy. Frost and Sullivan Consulting noted that Net Neutrality could impose a cost of anywhere between ten and fifty-five dollars a month on the consumer each year (Jude).
“These Internet regulations will deter broadband deployment, depress network investment and slow broadband speeds.” Said Ajit Pai, former Commissioner of the Federal Communications Commission. “Compare Europe, which has long had utility-style regulations, with the United States, which has embraced a light-touch regulatory model. Broadband speeds in the United States, both wired and wireless, are significantly faster than those in Europe. Broadband investment in the United States is several multiples that of Europe. And broad band’s reach is much wider in the United States, despite its much lower population density” (Pai). Of course this should be expected with any regulations which distort investment and choices; it is economics 101.
The first thought that comes to mind when advocating net neutrality is that of fairness. Why should “big business” be able to unfairly block out smaller business which compete with them? Well, frankly, this is just a red herring. There is absolutely no evidence of this as a systemic problem. As Gary Becker, the 1992 winner of the Nobel Peace Prize in Economics said, “there is significant and growing competition among broadband access providers and that few significant competitive problems have been observed to date. We also evaluate claims by net neutrality proponents that regulation is justified by the existence of externalities between the demand for Internet access and content services. We show that such interrelationships are more complex than claimed by net neutrality proponents and do not provide a compelling rationale for regulation” (Becker, Gary).
Furthermore the proponents of net neutrality confuse two concepts; price discrimination and product differentiation and because of this confusion fairness is lessened. When broadband providers charge, say Netflix more, they are engaging in product differentiation and not prices discrimination. It needs to be recognized that Netflix’s product and Gmail’s product are not the same. At any one time there is only a finite amount of bandwidth, like space in a mall and like space in a mall big stores get charged more than small stores from taking more space. Belk’s gets charged more than GAP and both get charged more than a cart in the halls of the mall. This is product differentiation, and this is what net neutrality advocates want to stop. They want to pretend as if Belk’s is no different than a store that takes up a tenth of the bandwidth, or better yet that there is no difference between Netflix and an email.
When looking around today in 2016 and think about how the American people have lived just 20 years ago, one of the first things that comes to mind is the Internet and how great it and can clearly see in day to day life how effective the status quo is. The Internet is great and it is seen just about every day. It is fast and gives us access to infinite knowledge in just seconds. This shouldn’t be a surprise since the United States is one of any two countries with three different broadband providers which are full developed. Eighty-five percent of us have Internet speeds 100 Mbp’s or faster (Powell). American investment into broadband than any other nation, the United States has four percent of the population but twenty-five percent of the investment (Powell). Our per capita investment in telecom infrastructure is fifty percent higher than that of the European Union and our investment as looked at as a percentage of GDP only five counties exceeded us (Ehrlich). This is why former FCC chair Michel K Powell said “By nearly any objective measure, the U.S. is a world leader in broadband” (Powell).
The FCC wants to, as Ajit Pai put it, use regulatory rules designed for Ma Bell (a telephone company which provided service in the late seventies and early eighties) in the 1930’s. This would treat the internet like a utility and it should not be treated like one and so far federal regulators have not been treating it as one. As a result over the twenty years there has been over a trillion dollars in private broadband investment. (Boaz) The changes the FCC offers to compromise our competitive industry. As the Progressive Policy Institute said “the hallmarks of a “competitive” industry are sustained innovation and investment, responsiveness to consumer preferences and demand, and market pressure on prices and profits. The evidence presented here makes the case that the provision of broadband in the United States is “competitive” by these standards” (Ehrlich).
While net neutrality might sound like a good idea, it would be a horribly misguided mistake. The United States did not become a nation with the tenth fastest broadband speed, third among our trading partners and second in the G-7, by having 1930’s utility style regulation (Pai). The American people got this honor by having an actual free internet. The harmful policy of net neutrality should be rejected on the grounds of excessive costs, a lack of fairness and the effectiveness of the status quo. As Ajit Pai put it, “consumers can easily access the content of their choice. Online entrepreneurs can and do innovate freely” (Pai).